BU457 Chapter Notes - Chapter 4: Information Asymmetry, Efficient-Market Hypothesis, Financial Accounting
Document Summary
Overview: efficiency implies that it is the information content of disclosure, not the form of disclosure itself, that is valued by the market. Market"s expectation of the effect of expected events on the value of the firm is on average unbiased (seasonality, retirement of ceo, etc. ) The only reason that prices will change is if some relevant but unexpected information comes along, which occurs randomly. If a sufficient number of investors display a collective bias in their reaction to new information about a firm, the resulting share price will be biased. It does suggest, however, that prices are unbiased relative to publicly available information and will react quickly to new or revised information. Implications of efficient securities markets for financial reporting. Additional information will not be wasted as market efficiency implies. More information disclosed, greater the investors" confidence: third, market efficiency implies that firms should not be overly concerned about na ve investor.
